Credit Unions Offer Many Advantages

ROBERT K. HEADY THE PEOPLE'S MONEY

July 12, 2004|ROBERT K. HEADY THE PEOPLE'S MONEY

Where do you keep your money these days? At some place that's underpaying you on CDs, overcharging you with high rates and stiff fees and penalties, or at a bank that treats you like a number instead of a human being?

Times are changing. Two of the best places to look nowadays are at a credit union or -- believe it or not -- a giant-size bank. The CUs are not-for-profit cooperatives owned by their members, and generally pay more on savings accounts and charge lower fees, while a new study by Consumer Reports shows that the biggest institutions, such as Bank of America and World Savings, are rated tops in features and convenience.

Credit unions typically serve people who have a common bond, such as working for the same company, belonging to the same fraternal group or church, or living in the same geographic area. When you walk into a CU, you're treated like a member of the family instead of a stranger, and when you discuss your accounts it's like sitting on the same side of the desk as the person you're talking to.

But the biggest advantage is that you and the other customers own the credit union. You have power -- including a strong say in how the CU operates. Every member can vote for the board of directors and the credit union's rules.

CUs operate in all 50 states and it's not hard to join one. Currently there are 83 million credit union members, who belong to a total of 9,488 CUs in the United States that are chartered by the federal government or the individual states, according to Callahan & Associates, a Washington, D.C., industry analyst. And while CUs focus mostly on consumer accounts, lately there's been a trend toward making loans to members' small businesses, as well, says Joe James, a Callahan executive.

Where you really score with a credit union is earning higher rates on your savings, and paying lower rates when you borrow money. A recent survey by Bankrate.com shows CUs on average offering 1.71 percent on a one-year CD, vs. the banks' 0.98 percent. A four-year car loan at a credit union was 5.84 percent compared with 7.14 percent at a bank. The big reasons for CUs' advantage is that unlike banks, they enjoy a freer tax status and don't have to return profits to their shareholders. Yet, like the banks, their deposits are federally insured.

When you switch to a credit union, obviously you have to sacrifice a little convenience, but it's worth it. You won't enjoy, say, the 16,000 nationwide ATMs you get with the Bank of America, but you'll earn more and save more. There are several ways to find a credit union for yourself:

Go to the Credit Union National Association's Web site at cuna.org.or phone 800-358-5710. It will show you how to search by name, city, ZIP code, area code or state, and it has links to community CUs.

Many employers, unions and trade associations have credit unions.

Many states have a credit union league or CU trade organization. Phone the National Credit Union Administration at 703-518-6330 for help.

Ask your church, local chamber of commerce and civic clubs if they have a CU.

Try the Yellow Pages.

Ask family members and friends. Some CUs qualify other family members for membership.

On the other hand, if you insist on sticking with banks, include some of the biggest institutions in your comparative shopping. Not that big is always best; the woods are loaded with big-bank rip-offs such as high penalties and fees, so you must be careful. But Consumer Reports says that certain outfits have lowered some fees by 14 percent since 1987 because they've been reaping outrageous profits on credit card penalties, and have been able to adjust a few of their other fees downward as a result.

For best results, check Bankrate.com for latest rate and fee trends, and the 100 highest bank yields on CDs and money market accounts.

Robert K. Heady is the founding publisher of Bank Rate Monitor. You can write to him in care of the South Florida Sun-Sentinel or send e-mail to jrnl8888@aol.com.